Correlation Between Nanotech Indonesia and Sumber Tani

Can any of the company-specific risk be diversified away by investing in both Nanotech Indonesia and Sumber Tani at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nanotech Indonesia and Sumber Tani into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanotech Indonesia Global and Sumber Tani Agung, you can compare the effects of market volatilities on Nanotech Indonesia and Sumber Tani and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nanotech Indonesia with a short position of Sumber Tani. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanotech Indonesia and Sumber Tani.

Diversification Opportunities for Nanotech Indonesia and Sumber Tani

-0.45

Correlation Coefficient

Nanotech Indonesia  Sumber Tani

Very good diversification

The 3 months correlation between Nanotech and Sumber is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nanotech Indonesia Global and Sumber Tani Agung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Tani Agung and Nanotech Indonesia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nanotech Indonesia Global are associated (or correlated) with Sumber Tani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Tani Agung has no effect on the direction of Nanotech Indonesia i.e., Nanotech Indonesia and Sumber Tani go up and down completely randomly.

Pair Corralation between Nanotech Indonesia and Sumber Tani

Assuming the 90 days trading horizon Nanotech Indonesia Global is expected to generate 3.79 times more return on investment than Sumber Tani. However, Nanotech Indonesia is 3.79 times more volatile than Sumber Tani Agung. It trades about 0.21 of its potential returns per unit of risk. Sumber Tani Agung is currently generating about -0.12 per unit of risk. If you would invest  1,800  in Nanotech Indonesia Global on October 24, 2024 and sell it today you would earn a total of  1,500  from holding Nanotech Indonesia Global or generate 83.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nanotech Indonesia Global  vs.  Sumber Tani Agung

Nanotech Indonesia Global

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nanotech Indonesia Global are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Nanotech Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sumber Tani Agung

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Tani Agung has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nanotech Indonesia and Sumber Tani

The main advantage of trading using opposite Nanotech Indonesia and Sumber Tani positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nanotech Indonesia position performs unexpectedly, Sumber Tani can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sumber Tani will offset losses from the drop in Sumber Tani's long position.

The idea behind Nanotech Indonesia Global and Sumber Tani Agung pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.